Dow futures surged in early trading on Wednesday after Washington and Tehran agreed to a two-week ceasefire, easing fears of a broader regional conflict and triggering a cross-asset relief rally.
Oil tumbled, Treasury yields eased and volatility gauges retreated as investors rotated back into risk assets.
The rebound rippled through Asia and Europe, while traders pared back expectations of prolonged Federal Reserve tightness, betting that lower energy prices could help cool inflation and support the global growth outlook.
5 things to know before Wall Street opens
1. Ceasefire drives a sharp rebound in futures
Wall Street futures rose strongly after the United States and Iran agreed to a temporary truce, calming investors who had feared a wider confrontation centred on the Strait of Hormuz.
The agreement helped unwind some of the defensive positioning that had built up as oil surged and geopolitical tensions intensified.
Futures markets pointed to a strong start, with contracts tied to the Dow Jones Industrial Average rising more than 2.2% in early trading.
Meanwhile, S&P 500 futures gained around 2.4%, and Nasdaq 100 futures advanced just over 3%, signalling broad-based optimism across major US equity benchmarks.
2. Oil slump eases pressure on inflation and rates
Crude prices fell sharply as traders concluded that immediate supply risks had diminished.
Oil dropped roughly 13% to 16%, with Brent crude trading in the low-$90s per barrel, relieving markets that had been worried higher energy costs would feed into inflation and squeeze corporate margins.
That shift matters for rate expectations.
Lower oil prices reduce near-term inflation pressure and weaken the case for any renewed hawkish turn from the Fed, after weeks in which markets had begun to price in a “higher-for-longer” outlook.
3. Global equities join the relief rally
The rebound was not confined to US markets.
Asian and European shares climbed sharply as investors embraced the view that the ceasefire could buy time for diplomacy and reduce the risk of disruption to global trade and energy flows.
In Asia, Japan’s Nikkei rose more than 5%, while South Korea’s KOSPI jumped sharply, posting gains of over 4%.
European markets followed, with the STOXX 600 up about 3.5%, the FTSE 100 gaining roughly 2.5%, and Germany’s DAX rising close to 4.5%.
4. Bonds rally as traders scale back tightening fears
Treasuries gained, with yields edging lower as falling oil prices prompted investors to reassess the risk of further Fed tightening.
The two-year Treasury yield slipped modestly to around 3.7%, while the benchmark 10-year yield also moved lower, reflecting a shift back into bonds as inflation concerns eased.
Interest-rate markets increasingly point to the Fed staying on hold in the near term, with attention now turning to whether softer energy prices could open the door to rate cuts later in the year.
5. Volatility cools, but the truce remains the key risk
The relief move was also reflected in volatility markets.
Futures linked to the CBOE Volatility Index fell to recent lows, suggesting investors are becoming less anxious about near-term swings after several sessions dominated by war headlines and energy shocks.
Still, the rally remains highly conditional.
Investors will be watching closely whether the ceasefire holds, whether shipping through the Strait of Hormuz resumes smoothly, and whether the drop in oil proves durable.
For now, markets are treating the truce as a meaningful de-escalation—but not yet a full resolution of the crisis.
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